AMN / NEW DELHI
The Confederation of All India Traders (CAIT) today filed an appeal petition in National Company Law Appellate Tribunal ( NCLAT) against the decision of Competition Commission of India (CCI) for approving Walmart-Flipkart combination. In its appeal, the CAIT has prayed for reversing the order of CCI as no opportunity of hearing was given by CCI to CAIT which maid valid objections on merit as also overlooking the violation of basic fundamentals of Press Note 3 of the Government.The CCI on August 8, 2018 unconditionally approved the proposed combination between Walmart and Flipkart. Seetharaman & Associates have filed appeal on behalf of CAIT.
In its appeal, the CAIT has maintained that it had filed a detailed objection against this proposed combination before the CCI on several grounds. It was alleged that the proposed combination would lead to a huge degree of vertical integration in the market since Walmart is a global retail giant with its own range of multi-brand products and where the B2B market is concerned, there is a high likelihood of Flipkart and Walmart would affect other wholesalers on the platform thus eliminating them in the long run by using several methods such as creation of algorithms perpetuating a search bias in favour of Walmart, and the creation of preferred sellers who would be receiving commissions and discounts which would not be available to other sellers on the platform. It was further alleged that offline retailers or sellers would not be able to compete with the combined power of Flipkart and Walmart due to their deep pockets
The Competition Act mandates the CCI to act in furtherance of the principles of natural justice. Despite repeated objections being filed on behalf of CAIT and other trade associations, the CCI denied them an opportunity of being heard. Passing an order without hearing CAIT which would be affected by the combination showed a gross misstep on the part of CCI and is a violation of natural justice principles.
The petition further said that CCI quite explicitly noted that an issue with respect to anti-competitive agreements may arise in the modus operandi of Flipkart, however, the CCI did not interfere in the said situation stating that these concerns are pre existing and not as a result of the proposed combination. The CCI did not take into account that these concerns would be further accentuated because of the combination. Further, given that the CCI has the power to take up such matters by its own motion, it is staggering to see CCI merely acknowledge the issue of a possibility of anti competitive vertical restraints but not act upon it.
Though the CCI acknowledged that a small number of sellers accounting for substantial sales on Flipkart received several discounts from the e-commerce giant. This is only bound to get aggravated once Walmart comes into the picture, as Walmart’s goods through preferred sellers would be prioritized and given discounts by Flipkart, thus pushing smaller non-preferred sellers out of online markets (e.g., clothing and apparel) where Flipkart is the leading e-commerce platform. The same is not only against the spirit of competition law but also in violation of FDI norms which mandate the maintenance of a level playing field.
In its petition, the CAIT said that CCI also ignored in its order the predatory activities carried out by both Flipkart and Walmart in the past, despite acknowledging such predatory practices by Flipkart prior to this proposed combination. The CCI, which is supposed to adjudge the likelihood of impact of a combination if it is approved on the market, completely disregarded the predatory activities undertaken by both parties in India and abroad in the past that were categorically put forth in the objections filed by CAIT. Such repeated patterns in their behaviour obviously merited consideration by the CCI.